Why Schools Fail: The Economic Calculation Problem

Why has researcher Larry Cuban concluded that more than a century of constant reform has led to effectively no change? Why are government schools so resistant to fundamental change? While Larry Cuban and Richard Elmore and other educational researchers use their considerable knowledge and expertise to explore the myriad details of educational institutions themselves, I am inclined to take a broader systems approach, grounded in economic theory.

What if the problem, as currently stated, cannot be solved? Let us step back and ask “who makes the decisions, and what information do they use?” Currently, important decisions about what resources to use, and how to use them, are made by numerous political agencies – Departments of Education, School Boards, and the staffs of schools. The information available to them is mostly political information – who votes for what. There is a body of literature nearly a century old which explores some of the problems with such bureaucratic systems, compared with an alternative: decisions based on voluntary transactions where both parties “have skin in the game.” As Mises summarized: “Where there is no free market, there is no pricing mechanism: without a pricing mechanism, there is no economic calculation.” Education as we know it in the United States and in many other countries is far from a free market; it is therefore incapable of performing economic calculation; it cannot determine what people want, nor how to deliver it efficiently.

This broader theory dovetails with remarks by Andrew J. Coulson:

Competitive educational markets have consistently done a better job of serving the public than state-run educational systems. The reason lies in the fact that state school systems lack four key factors that history tells us are essential to educational excellence: choice and financial responsibility for parents, and freedom and market incentives for educators. School systems that have enjoyed these characteristics have consistently done the best job of meeting both our private educational demands and our shared educational ideals.

Lest one think that Coulson’s research applied only to times and places long past, there is the modern discovery by James Tooley of thousands of parent-funded schools with little or no government oversight – so little oversight, in fact, that many governments are oblivious to their very existence. Yet, tests by Tooley’s team of 32,000 students discovered that students were taught at lower cost and about one grade level ahead of those taught by competing government schools.

Free-market schools have more freedom to evolve, being outside the stifling confines of political control. Given freedom and incentives, some people will discover better methods, and competition will lead others to copy and adapt those better methods.

The educational innovations discovered by Tooley, Dixon, and others tend to spring up most often where regulations are non-existent or effectively unenforceable. India, for example, has three volumes of detailed regulations, but insufficient police power to enforce them. Wise and liberal (in the classical sense) governments would sharply prune back educational regulations to allow more space for the flourishing of human creativity.

This overhaul of regulation should be deep; there is evidence from Democratic Free Schools, home education, the unschooling movement, and other places that the entire idea of “12 years times 180 days times 6 hours” is highly inefficient, and sometimes leads to serious negative outcomes.


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